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GEICO Insurance Co. v. Bernheim

Supreme Court of Vermont

August 30, 2013

GEICO Insurance Company
Thomas Bernheim and Nancy Bernheim

On Appeal from Superior Court, Rutland Unit, Civil Division Mary Miles Teachout, J.

Antonin Robbason of Miller Faignant & Robbason, P.C., Rutland, for Plaintiff-Appellee.

Tom Bernheim and Nancy Bernheim, Pro Ses, Essex Junction, Defendants-Appellants.

PRESENT: Reiber, C.J., Dooley, Skoglund, Burgess and Robinson, JJ.


¶ 1. Defendants, Nancy and Thomas Bernheim, appeal the trial court’s summary judgment decision granting plaintiff GEICO Insurance Company’s claim against them for reimbursement of $10, 000 that GEICO had paid defendants under the medical-payments provision of their automobile insurance policy. Although we agree with the trial court that defendants must reimburse GEICO, we reverse and remand for a determination of the proper reimbursement amount.

¶ 2. The facts related to this appeal are not in dispute and can be summarized as follows. Defendants were, at the time of the events leading to this case, insured by GEICO under an automobile insurance policy. On July 23, 2007, defendant Nancy Bernheim was involved in a collision with another car driven by an operator who was insured by Liberty Mutual. [1] As a result of the collision, defendant sustained injuries, and GEICO paid her $10, 000 (the policy limit) under the medical-payments provision of defendants’ policy.

¶ 3. The insurance policy included the following clause:

When we make a payment under this coverage, we will be subrogated (to the extent of payment made by us) to the rights of recovery the injured person or anyone receiving the payments may have against any person or organization. Such person will do whatever is necessary to secure our rights and will do nothing to prejudice them.

¶ 4. On October 9, 2007, GEICO notified Liberty Mutual of GEICO’s subrogation rights related to the payment it had made to defendants. In August 2008, defendants entered into a settlement with Liberty Mutual for $30, 000 with regard to all claims. That settlement stated that it was “inclusive of any liens, including but not limited to GEICO Insurance Company.” Despite having received notice of GEICO’s subrogation right, Liberty Mutual paid the entire settlement directly to defendants.

¶ 5. On March 20, 2009, GEICO sent a demand letter to defendants, seeking reimbursement of the $10, 000 payments that it had made. They did not accede to GEICO’s demands, and on January 20, 2010, GEICO filed suit claiming breach of contract and breach of fiduciary duty solely against defendants and did not join Liberty Mutual as a party. GEICO alleged in its initial pleadings that it had not had an opportunity to give notice of its subrogation rights to Liberty Mutual before Liberty Mutual’s settlement with defendants, but after business records came out during discovery demonstrating that GEICO had in fact given such notice, it withdrew that allegation, explaining that it had not been aware of the notice. On July 10, 2010, [2] the statute of limitations on any claim by GEICO against Liberty Mutual ran.

¶ 6. Both parties moved for summary judgment, and the trial court granted GEICO’s motion and denied defendants’ motion. In its initial decision of July 14, 2011, the trial court stated that “GEICO is correct that this action sounds in breach of contract, ” but ultimately based its decision on unjust enrichment, stating that “[t]o the extent that [defendants] have recovered twice for their injuries, GEICO is entitled to reimbursement of its payment. Otherwise, [defendants’] double recovery amounts to unjust enrichment.” It also noted that this holding “finds support in the trustee theory of settlement proceeds.” In its October 31, 2011 decision on a post-trial motion to alter judgment, the court clarified that “[t]he decision was ultimately based on the trustee theory of settlement proceeds, whereby the Bernheims hold their recovery from Liberty Mutual in trust for GEICO to the extent of GEICO’s prior payment under the policy.” A final order and judgment, which incorporated the summary judgment decision but offset defendants’ costs against plaintiff’s recovery, was entered on April 16, 2012. This appeal followed.

¶ 7. All of the issues on appeal are based on the summary judgment decision, as clarified by the decision on the motion to alter judgment. [3] We review summary judgment rulings de novo, using the same standard as the trial court. Gallipo v. City of Rutland, 2005 VT 83, ¶ 13, 178 Vt. 244, 882 A.2d 1177. Summary judgment is appropriate if, based on the “pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, ” id., the movant “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” V.R.C.P. 56(a).

¶ 8. Defendants make a number of arguments as to why the trial court’s decision on summary judgment should be reversed. They argue that: (1) Utica National Insurance Company v. Cyr, 2007 VT 134A, 183 Vt. 564, 945 A.2d 361 (mem.), bars GEICO from seeking recovery only from defendants instead of from Liberty Mutual; (2) the defense of laches applies because GEICO chose not to pursue its subrogation rights; (3) GEICO withdrew the essential claim in its case when it recognized that it had notified Liberty Mutual of its subrogation right before defendants’ settlement with Liberty Mutual; (4) GEICO waived its rights of recovery by “deliberate attempts to conceal from [defendants] and from the trial court” that it had notified Liberty Mutual of its subrogation rights; (5) GEICO failed to demonstrate what portion of the settlement proceeds were subject to recovery by GEICO; (6) the trial court erred in raising the issue of the statute of limitations for GEICO’s potential claim against Liberty Mutual, as the statute of limitations is an affirmative defense; (7) defendants did not have an obligation to protect GEICO’s subrogation rights; (8) the trial court’s findings of fact were not based on evidence in the record; and (9) the trial court abused its discretion by ...

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